Ohio Law

DOES A REFERENCE IN A DEED TO AN OUTSTANDING MONETARY OBLIGATION CONSTITUTE A LIEN?

by Michael J. Sikora III

Sikora Law LLC

A recent decision by the Eleventh District Court of Appeals illustrates the differing views that exist concerning relatively fundamental real property law concepts. See Dietl v. Sipka, 185 Ohio App.3d 218, 2009-Ohio-6225. In the Dietl case, each of the three Judges on the Panel of the Eleventh District Court of Appeals had a different view concerning how the interest of the creditor in that case should have been perfected.

The Dietl case dealt with a situation in which the Sipkas dissolved their marriage, and the Separation Agreement filed in their domestic case stated that Ms. Sipka would receive $25,000.00 as compensation for her interest in the marital residence. Before the domestic action was completed, Mr. Sipka refinanced the obligations associated with the marital residence. Ms. Sipka later executed a Quitclaim Deed to Mr. Sipka that contained the following language: “[e]xcepting and reserving a lien in the amount of Twenty Five Thousand Dollars ($25,000.00) bearing six percent (6%) interest pursuant to the Separation Agreement filed in the Court of Common Pleas, Division of Domestic Relations, Trumbull County, Ohio”. No other steps were taken by Ms. Sipka to perfect her interest. The refinancing lender later foreclosed its mortgage, and Ms. Sipka was not named as a party to the foreclosure case. The Dietls purchased the subject property from the lender after the foreclosure case was completed.

In response to Ms. Sipka’s assertion that she retained a lien on the property, the Dietls filed a Complaint for Declaratory Judgment and to Quiet Title, asking the Court to declare that Ms. Sipka had no interest in their property. The trial court agreed with the position of the Dietls and granted summary judgment in their favor, finding that Ms. Sipka did not perfect her interest in the property. Ms. Sipka appealed that decision to the Eleventh District Court of Appeals.

A majority of the Judges on the Court of Appeals agreed that Ms. Sipka did not perfect her interest in the property. However, each of the three Judges on the Panel authored a separate opinion. Judge Grendell issued the majority opinion, explaining her view that Ms. Sipka did not have an interest in the subject property because she did not perfect a judgment lien. Judge O’Toole authored a concurring opinion, noting that Ms. Sipka did not have an interest in the subject property because she did not obtain a mortgage interest in the subject property. Finally, a dissenting opinion was penned by Judge Trapp, who determined that the reference to Ms. Sipka’s interest in the Deed to her husband was sufficient to perfect her interest of record and that Ms. Sipka continued to hold a valid encumbrance on the property.

Thus, the majority of the Court of Appeals reached the conclusion that Ms. Sipka did not take sufficient steps to perfect her interest. The moral of the Dietl case is that one of the statutory methods should be employed by those attempting to obtain a lien on real property.

Mike Sikora is the founder and owner of Sikora Law LLC. Sikora Law LLC represents real estate companies, including title insurance companies and their insureds, in disputes throughout the State of Ohio. Mike can be reached at (440) 266-7777 or MSikora@SikoraLaw.com.